February 26, 2014, 12:07 PM

Digital content losses mount at Barnes & Noble in fiscal Q3

But the retailer has a plan to generate more content sales in the future.

Lead Photo

CEO Michael Huseby

Bookstore chain Barnes & Noble Inc.’s digital content sales continued to slide in the third quarter of fiscal 2014, but it has a plan to get them back on track.

Sales of e-books, e-magazines and other paperless reading materials were down 26.5% year over year for the quarter ended Jan. 25, to $57.0 million, the retail chain announced this morning. In the last quarter those sales were down 21.2% year over year and in Q1 they were down 15.8%. Barnes & Noble says the primary cause for declining digital content sales is lower sales of its Nook e-reader and tablet devices.

That may soon change. CEO Michael Huseby told investors in a conference call this morning that the retailer plans to announce a new e-reader device in early fiscal 2015. In this past quarter, it also began a shakeup of its Nook business, including eliminating 75 positions (leaving roughly 500 Nook employees in place) and working to shift more of its hardware production costs to outside manufacturers building on its behalf, he said. Barnes & Noble has not announced which manufacturers it is considering for those deals, nor with whom it is building the new device expected within the year.

“Going forward, generally our plan is to produce reading-centric devices with more of an emphasis on collaboration for [hardware development],” Huseby said. “We think reading devices are important in terms of deriving content revenue—because that’s where the margin really is. The margin is not really in the device business, but in the content business.”

In line with that view, he also discussed Barnes & Noble’s efforts in working with Microsoft Corp. to expand the availability of its digital content globally via other reading platforms. Microsoft invested $300 million in the Nook Media business in October 2012, spurring the division’s spinoff as a Barnes & Noble subsidiary. Today, Barnes & Noble digital contentcan be found in 30 countries, Huseby said. 

For the fiscal 2014 third quarter ended Jan. 25, Barnes & Noble reports:

  • Total revenue of $2.00 billion, down 9.9% from $2.22 billion in Q3 last year.
  • Net income of $63.2 million, compared with a net loss of $3.68 billion in Q3 last year.
  • Total sales in the retail division, which includes stores and e-commerce sales, of $1.41 billion, down 6.6% from $1.51 billion in Q3 2013. Online sales through BarnesandNoble.com were also down, though the retailer doesn’t break out those sales separately. Comparable-store sales were down 4.9% and some stores closed in the quarter, the retailer says, without giving a specific number.
  • Total sales in the Nook division of $156.9 million, down 50% from $314.0 million in Q3 2013.
  • Total college bookstore sales of $486.2 million, down 6% from $517.2 million in Q3 2013.

For the first three months of fiscal 2014, the retailer reports:

  • Total revenue of $5.06 billion, down 9% from $5.56 billion in the same period last year.
  • A net loss of $10.56 billion, compared with a net loss than $43.01 billion in the same period last year.
  • Total sales in the retail division, including store and e-commerce sales, of $3.34 billion, down 7.7% year over year from $3.62 billion.
  • Total sales in the Nook division of $418.7 million, down 37.3% year over year from $668.3 million.
  • Total college bookstore sales of $1.45 billion, down 4% year over year from $1.51 billion.

BarnesandNoble.com in No. 27 in the 2013 Internet Retailer Top 500 Guide. The chain’s fiscal year will end in late April.

 

 

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